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AGL Energy says no, but other coal power players to extend life of plants

AGL Energy says no, but other coal power players to extend life of plants

AGL Energy's determination not to extend the life of its Liddell coal-fired power station in NSW has not been matched by some other generators, with
the owner of the large Vales Point plant insisting that generator will run for many years beyond its rated life.

But AGL has reaped the benefits of its low-cost coal-heavy generation portfolio and soaring power prices, with its wholesale electricity business the
biggest driver of its 14.4 per cent increase in full-year profit in 2016-17, to $802 million.

The wholesale business, dominated by the Bayswater, Loy Yang A and Liddell coal-fired plants, added about $166 million to the bottom line.

But in response to the government's push to extend the life of the Liddell plant, Mr Vesey tweeted: "We're getting out of coal. We committed to the
closure of the Liddell power station in 2022, the end of its operating life."

A spokeswoman said AGL had "provided this advance notice to avoid the volatility created by the sudden exit of other coal-fired power stations."

"AGL is actively assessing what capacity will be needed post 2022 and we, along with other market participants, will consider AEMO's report in light
of these plans," she said.

But Trevor St Baker, chairman of Sunset Power International, owner of Vales Point, said he expected that 1320MW plant to run much longer than its 2029
life date would suggest.

"As for Vales Point, Sunset Power International is investing in a longer-life capability than to 2029, and its present performance indicates that it
will be part of the essential and critical base-load generation capability required in the National Electricity Market for many years beyond 2029,"
Mr St Baker said.

"Australia cannot afford any more base-load generator closures without replacement."

The spat over the future of the country's coal plants came as the Australian Energy Market Operator warned there would be more blackouts over the next
10 years because of the retirement of older coal-fired stations, with renewables unable to plug the shortfall.

Chief Scientist Alan Finkel - who delivered the landmark Finkel energy review in June - described extending the life of coal plants as a "quite attractive"
option to give more time to transform the electricity supply system while keeping prices in check and preserving supply security.

"There is some advantage in investing in existing coal generation to give us time to bring on the batteries, the pumped hydro and the other support
systems we need to make the wind and the solar work with the maximum effectiveness for us in terms of security and low cost," Professor Finkel
said.

"We're trying to balance three different outcomes: security, reliability and emissions. Yes, it makes one of those three things more difficult but
you get benefits on the other two."

While the rise of renewable energy such as wind and solar would help boost generation over the next four years, AEMO pinpointed the crunch time as
the slated 2022 closure date for Liddell, in NSW's Hunter Valley.

AEMO's "electricity statement of opportunities" report released on Tuesday - ahead of a second report to the Turnbull government - said South Australia
and Victoria were at the biggest risk of involuntary load shedding, which leads to blackouts because there is not enough generation capacity, demand
side participation, or network capability, to meet demand.

"The potential for USE [unserved energy use] and not meeting the current reliability standard is projected to then increase in NSW and Victoria after
Liddell power station closes in 2022," the report said.

"Retirement of other coal generation in NSW after 2022, if not appropriately replaced by firming capability, could significantly increase the risk
of load shedding."

After SA experienced a string of major blackouts last summer, AEMO and other energy bodies are working to ensure there is enough stability in the National
Electricity Market to deal with the challenges of the 2017-18 summer.

"Any material reduction in capacity over the peak summer months - for example, from slower than projected renewable generation installation, lower
than projected yield from wind, or reduced capacity of thermal plant during high temperatures - could lead to significant shortfalls and USE not
meeting the current reliability standard," the report says.

"Any material increase in demand over peak summer months could also reasonably lead to supply shortfalls."

AGL said last month it is examining options to replace the capacity it will lose at Liddell, with renewable energy, storage and gas all likely to play
a role. Mr Vesey said the most economic option would involve a mix of solar and wind power, "firming" capacity from batteries, pumped hydro and
gas peaking plants.

With 1680 megawatts of usable capacity, the coal plant, which was built in 1973, supplies about 8000 gigawatt-hours of electricity a year, enough to
power more than one million homes, according to AGL.

AEMO's analysis found renewable generation could provide some support to maintain reliability, but the influx of renewables could increase the risk
of load-shedding if it led to the earlier retirement of existing thermal generation.

It found the closure of Engie Group's 1600 megawatt Hazelwood coal-fired power station in Victoria's La Trobe Valley in March had resulted in a net
reduction of 1100 megawatts in the NEM to 47,016 megawatts compared to last year.

AEMO chief executive Audrey Zibleman said the latest report confirmed the need for additional generation investment and the need for Australia to have
a portfolio of despatchable energy resources that can respond quickly to a changing energy system.

"The power system does not have the reserves it once had, and therefore to balance peak summer demand in real time, targeted actions to provide additional
firming capability are necessary to reduce heightened risks to supply," Ms Zibelman said.

Ms Zibelman said the market operator was "indifferent" to what type of technology was used to maintain balance on the grid which could include new
coal or gas, battery storage of demand resource management behind the meter.